Crude Oil, US Dollar, Debt Ceiling, TOPIX, ASX 200, Federal Reserve – Talking Points
- Crude oil gained some support with the prospect of a US debt ceiling solution
- The Fed reminded markets that the rate path ahead is up for conjecture
- If sentiment is assisted by the removal of debt uncertainties, will WTI rally?
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Crude oil eked out small gains to start Tuesday after seemingly positive developments in the aftermath of talks between President Joe Bidden and House Speaker Kevin McCarthy.
Post the North American close, both parties said that a default is not on the cards. McCarthy went on to say that the discussion was “productive in areas where they have a difference of opinion.”
Wall Street futures are indicating a positive start to its cash session after a mixed Monday that saw the Nasdaq add 0.50% while the Dow Jones index slipped 0.42%. It seems that the big tech names within the Nasdaq continue to garner favour.
APAC equities are mostly in the red although Australia’s ASX 200 displayed a degree of buoyancy. Japan’s TOPIX index made a fresh 33-year high before retreating.
Currency markets have had a quiet Tuesday so far and appear to be in a holding pattern until the US debt situation is resolved.
Once it has been settled, attention may turn back toward the Federal Reserve and the rate path. Overnight saw several Fed speakers voice slightly different slants on where they see policy heading.
The mostly hawkish rhetoric came from Minneapolis Federal Reserve President Neel Kashkari, San Francisco Federal Reserve President Mary Daly and St. Louis Federal Reserve President James Bullard.
The less hawkish comments suggesting a pause in hikes came from Atlanta Federal Reserve President Raphael Bostic while Richmond Fed President Tom Barkin deferred from pre-judging what the next decision will be at the Federal Open Market Committee (FOMC) meeting.
JP Morgan CEO Jamie Dimon also warned that interest rates could go as high as 6 or 7%. He made similar comments back in February. The Fed funds target rate is currently 5.0 – 5.25% and the next meeting will be in mid-June.
Gold is treading water near US$ 1,960 an ounce and silver has also softened to be near US$ 23.56 an ounce.
The WTI futures contract is over US$ 72 bbl while the Brent contract is a touch above US$ 76 bbl. Canadian wildfires continue to impact production output there.
The weekly US Energy Information Agency (EIA) data will be released on Wednesday, and it will be closely watched after last week’s surprise leap in oil inventory.
European and North American PMIs will be released and Bank of England Governor Andrew Bailey will be testifying on monetary policy.
The full economic calendar can be viewed here.
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How to Trade Oil
WTI CRUDE OIL TECHNICAL ANALYSIS
WTI failed to overcome resistance at 73.93 last Friday when it made a high at 73.58 and these levels may continue to offer resistance.
The 34- and 100-day Simple Moving Average (SMA) is just above these levels and may lend resistance.
On the downside, support might reside at the breakpoints and prior lows of 69.41, 66.82, 66.12, 64.36, 63.64 and 62.43.
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCarthyFX on Twitter